The forfeiture of the deposit by the Committee of Creditors was lawful and justified under the provisions of the Insolvency and Bankruptcy Code, 2016, due to the appellant's failure to comply with the Resolution Plan.

JUDGMENT

(Hybrid Mode)

[Per: Arun Baroka, Member (Technical)]

These two appeals have been filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) by the Appellant, Peter Beck und Partner Vermoegensverwaltung GMBH, against the order dated 12.12.2023 passed by the Learned National Company Law Tribunal (NCLT), Mumbai Bench in IA No.1360 of 2022 and IA No. 2989 of 2023 in CP (IB) No. 246/NCLT/MB/2017. The Appellant sought a refund of INR 10 Crores deposited with Abhyudaya Cooperative Bank, which was subsequently forfeited by the Committee of Creditors (CoC) led by the State Bank of India (SBI).

Brief Background:

2. The NCLT dismissed the Appellant’s application seeking the refund and allowed SBI’s application to forfeit the amount. The Appellant contends that the forfeiture was unlawful and that the CoC’s actions were contrary to the terms of the Resolution Plan and the applicable regulations.

3. Over the course of the CIRP, the Appellant failed to submit valid and enforceable bank guarantees as required under the Resolution Plan, leading to delays and non-compliance with the plan’s implementation schedule. Consequently, the CoC, through SBI, sought directions from the NCLT to forfeit the INR 10 Crores deposited by the Appellant, which the NCLT granted.

4. Heard the counsels of both sides and also perused all the records before us.

5. The primary issues for determination in these appeals are:

a. Whether the CoC’s forfeiture of the INR 10 Crores deposited by the Appellant was lawful.

b. Whether the Appellant was restrained by the CoC from implementing its Resolution Plan.

Appellant’s Arguments

6. The Appellant is a company incorporated under the laws of Germany and was the former Successful Resolution Applicant (SRA) for Sharon Bio Medicine Limited, the Corporate Debtor (Respondent No. 1). Restraint by the CoC and Misapplication of Deposited Funds

7. The Appellant asserts that the Committee of Creditors (CoC), particularly the State Bank of India (SBI), obstructed the implementation of the Resolution Plan by not providing the necessary account details for depositing additional funds. The Appellant further argues that the forfeiture of the INR 10 Crores was unwarranted as it was intended for share application money, not as a performance guarantee.

Approval and Implementation of the Resolution Plan

8. The Resolution Plan for Respondent No. 1 was approved by the Adjudicating Authority on 28.02.2018. This approval was challenged by the former promoter before this Hon’ble Tribunal, which stayed the implementation of the plan. The appeal was eventually dismissed on 19.12.2018, and the Resolution Plan was upheld by the Hon’ble Supreme Court on 05.04.2019.

9. Under the approved Resolution Plan, the Appellant was required to furnish a bank guarantee of INR 10 Crores, valid from the plan’s approval by the CoC until the Effective Date, which is defined as the date when the Appellant would be allotted all equity shares in accordance with the plan. Accordingly, the Appellant provided a bank guarantee issued by Banque De Luxembourg on 19.02.2017, which was subsequently renewed.

Issues with Bank Guarantee and Deposit of Funds

10. On 04.07.2019, during a meeting of the Monitoring Agency and Lenders, SBI suggested depositing INR 10 Crores in lieu of the bank guarantee due to operational difficulties faced by the Appellant with the renewal of the bank guarantee in the required SWIFT format.

11. Consequently, the Appellant deposited INR 10 Crores in the account of Respondent No. 1 at Abhyudaya Cooperative Bank on 27.08.2019, in accordance with the CoC’s instructions. However, the CoC’s actions obstructed the deposit of the remaining INR 5 Crores, thu